Boldness on Entitlement Reform Will Benefit Republicans

Jeffrey H. Anderson

March 29, 2011 6:00 AM

As Republicans contemplate what sort of budget they should propose (real budget solutions, not continuing resolutions), it's important to realize that they are in a somewhat enviable position: What is clearly best for the country is also likely best for them politically.

As Jim Capretta notes, President Obama is not going to run on Obamacare. The last thing Obama wants the 2012 election to be is a referendum on his highly unpopular overhaul. Capretta rightly concludes that “having exhausted his first term securing passage of Obamacare, the president will have to find some other rationale to justify requesting a second term.”

Obama cannot very well run as a foreign policy president. He cannot run as a fiscally serious president. He cannot run as the president who can fix the economy. So he will have to go negative, just like last time. In 2008, he ran against President Bush (largely ignoring his opponent, John McCain), and in 2012 he will almost certainly run against Republicans’ efforts to reform entitlements (largely ignoring his own record).

Republicans’ knee-jerk reaction might well be that this should make them more cautious about entitlement reform, that they should let such reforms proceed very slowly, by grandfathering in those currently at age-55 or older and thereby delaying the reforms’ implementation for a decade or more. But this would be exactly the wrong conclusion. If Republicans touch entitlements, as they must — because the country’s fiscal situation requires it, because they have publicly pledged to do so, and because the Tea Party will have their heads if they don’t — Obama will demagogue them. It won’t matter whether they cautiously nudge the ball along or tackle these problems boldly and sensibly. Either way, the president will demagogue Republicans.

The difference is, if Republicans choose the overly cautious approach, they will have little to point to in the budgetary numbers for their efforts. If they phase in entitlement reform starting ten years from now, the Congressional Budget Office (CBO) will show that their 10-year budget looks, well, rather Obama-like. They will then be left trying to explain why their proposed reforms are necessary even though they apparently don’t move the needle. They will be (portrayed as) proposing pain without reward.

So, they need to provide the reward. This year, mandatory spending alone will exceed total federal revenues (according to the president’s own budgetary projections). Think about that: We could spend nothing whatsoever on defense or on any other discretionary programs, and we still wouldn’t be able to make ends meet.

This year, for every $4 that the federal government takes in, it will spend a little over $7 (again, according to the president’s own projections). The president’s response has been to propose a budget that calls for us to spend a little over $7 for every $5 brought in. That’s not leadership.

While grandfathering in current beneficiaries, Republicans should propose entitlement reforms that are clear, relatively easy to explain, and more or less immediate. On Social Security, they should not needlessly complicate matters. They should simply propose raising the retirement age by 2 or 3 months a year, starting one year out. Those who are already enrolled wouldn’t be affected. Those who are scheduled to enroll within 12 months wouldn’t be affected. Those who are scheduled to enroll after that will have their date pushed back 2 to 3 months — and so on — until the retirement age hits 69 or 70.

Any delay would only make matters worse. In recent congressional testimony (here’s a clip), social security trustee Chuck Blahous said that “delay basically concentrates the effects of any adverse consequences on a shrinking number of people,” and that it would potentially produce the “nightmare scenario from the standpoint of younger generations” of “completely exempting the baby boom generation, which is a historically large generation, from making any contribution to the problem.” Blahous also added that “delay brings in the fundamental question, whether we can fix the system at all.”

On Medicare, an even more substantial problem, Republicans should propose more substantial solutions, along the lines of the Ryan-Rivlin model — only phased in more quickly (while grandfathering in current beneficiaries). Medicare’s broken system — which is a major reason why the costs of Medicare and Medicaid have risen 33 percent more, per patient, than the costs of all other health care in America — should be transformed into a sustainable system in which the government (meaning, the taxpayer) continues to be the payer, but future Medicare beneficiaries (and whichever current ones freely decide they'd like to switch) get to take the money they are given and use it to buy a private plan of their choice. This will give seniors more control, will give everyone involved the incentive and opportunity to pursue, or provide, good value, and will therefore lower health costs without reducing the quality of care. In many cases, these reforms would actually lead to higher quality care, as providers are now often rewarded financially for not getting the diagnosis right the first time and instead putting patients through unnecessary tests or procedures.

These Medicare reforms should be phased in almost immediately — grandfathering in only those who are currently enrolled (while allowing them to switch if they'd like) and those who are within one year of enrollment. Here are several reasons: Doing so would enable Republicans to show real and substantial budgetary savings over ten years. It would help avoid giving the (false) impression that those who would be grandfathered in, rather than enrolled into the newly reformed program, would somehow be getting a better deal. And it would be the right thing for the country. We cannot afford to wait.

In short, Republicans should force President Obama to make the case against needed entitlement reforms that the CBO scores as — finally! — making a real dent in our federal deficits and debt, rather than letting him make the case against entitlement reforms that the CBO scores as not doing much good at all over ten years. If Republicans are to go down the road of entitlement reform — as they must — they must go boldly.